Income Tax Appellate Tribunal - Mumbai
Dr. Suryakant N Gandhi, Mumbai vs Assessee on 16 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'E', MUMBAI
BEFORE SHRI DINESH KUMAR AGARWAL, JUDICIAL MEMBER
AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER
I.T.A. NO.194/M/2012
ASSESSMENT YEAR:2004-2005
Dr. Suryakant N.Gandhi, Vs. Income Tax Officer, Ward 11(3)(3),
61, Udadi Tarang, Near Hotel Marriot, Aayakar Bhavan, M.K. Road,
Juhu Road, Mumbai-400049. Mumbai - 400 020.
PAN: AAFPG7589K
(Appellant) (Respondent)
Appellant by : Shri Dr. Suryakant N. Gandhi
Respondent by : Shri Manoj Kumar, DR
Date of Hearing:3.1.2013 Date of order: 16.1.2013
ORDER
Per D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 9.1.2012 is against the order of CIT (A)- 2, Mumbai dated 4.10.2010 for the assessment year 2004-2005.
2. In this appeal, assessee raised the following grounds which read as under:
"1. On the facts and in the circumstances of the case, the order of the Ld CIT (A) was wrong in confirming the order passed by the Assessing Officer imposing penalty of Rs. 16,41,239/- was correct under section 271(1)(c) of the Act.
2. The CIT (A) erred in concluding that claim was not bona fide regarding travel expenses undertaken by for daughters of the Appellant from USA / India relating to services rendered for MHADA project and Arbitration proceedings.
3. On the facts and in the circumstances of the case, the CIT (A) was not justified in holding that there is an act of concealment of furnishing of inaccurate particulars of income.
4. The CIT (A) has failed to consider the facts placed on record and circumstances under which qualified daughters have rendered services for profession of the appellant and realization of claim.
5. The case law cited by the CIT (A) is distinguishable, consequently, not justified in holding that case laws cited by the appellant is not applicable."2
3. Briefly stated relevant facts of the case are that the assessee is an Engineer by profession under the name and style of M/s. Designers India. He was selected as a Project Management Consultant for Mass Housing Project of MHADA. During the year, assessee disclosed the professional receipts of Rs. 2.82 Cr (rounded off to nearest lakhs) and the Net Profit of Rs. 2,07,08,353/-. In the books, the assessee debited a sum of Rs. 49,73,450/- under the head "Reimbursement of expenses incurred abroad for MHADA claim (provision)". AO noted that this expenditure was incurred in connection with foreign travel by his daughters named (1) Suhani Sandip Gandhi (2) Saloni Tushar Merchant (3) Parul Nisheth Joshi and (4) Priya Safal Gandhi. It was claimed that these persons are the qualified ones in the studies of Architecture / Software Engineering / Commercial Arts / Computer Graphics and they rendered services to the assessee by visiting India in execution of the above said projects. It was discussed in the orders that the Rs. 49,73,450/- includes an amount of Rs. 8,39,382/- in addition to the travelling expenses. AO made additions considering the fact that assessee failed to produce supporting evidences / bills and the assessee also filed to produce confirmation letters. Finally, AO made an addition of Rs. 49,73,450/-. AO rejected the assessee's submission that his daughters are qualified persons and visited India to assist the assessee in successful execution of the MHADA project as well as the MHADA arbitration work. Thus, the assessee filed an appeal before the CIT(A) and the assessee could not obtain the success before the FAA. Aggrieved with the order of the FAA, the assessee filed an appeal before the Tribunal.
4. Hon'ble, Tribunal confirmed the additions on merits vide the order dated 10.8.2012 in ITA No.4978/M/2008 for the assessment year 2004-05. This issue was discussed in para 9 of the impugned order and relevant discussion relating to addition of Rs. 49,73,450/- is given in para 13. The reasons for confirming the disallowance include (1) assessee filed to discharge onus when deduction of Rs. 49,73,450/- is claimed; (2) assessee changed method of accounting from cash to the mercantile accounting which is not bona fide; and (3) assessee failed to furnish the evidences / bills in support of the claims. Thus, the addition of Rs. 49,73,450/- was finally sustained by the Tribunal on merits.
35. Further, AO levied the penalty u/s 271(1)(c) of the Act on the above said addition vide his order dated 30.3.2010 amounting to Rs. 16,41,239/- ie 100% of the tax sought to be evaded. The penalty was levied for the reasons that the assessee failed to furnish evidences in support of the claim and also for the reasons of assessee's failure to furnish any fresh explanation during the penalty proceedings. Assessee took up the appeal before the first appellate authority and contested that the levy is not justified. After hearing the assessee, CIT (A) passed the impugned order confirming the levy of penalty of Rs. 16,41,239/-. As per the CIT (A), Hon'ble Delhi High Court judgment in the case of CIT vs. Zoom Communications (P) Ltd[2010] 191 Taxman 179 helps the revenue and thus, held that assessee has not made a bona fide relating to the foreign travel expenses undertaken by the daughters of the assessee. However, it is interesting to note that the CIT (A) agreed with the assessee in affirming that the four daughters of the assessee are qualified personnel and they contributed their services to some extent to the assessee in successful execution of the MHADA project and arbitration works. Eventually, CIT (A) affirmed the AO's finding that their visit to India are not for the purpose of business of the assessee and questioned the quantum of expenditure claimed by the assessee vis-à-vis services received by the assessee. Aggrieved, with the above decision of the CIT (A), assessee is in appeal before the Tribunal.
6. Before us, assessee - Dr Suryakanth Nanalal Gandhi appeared to defend his case without assistance of any Counsel and filed a paper book. It contains a copy of the written synopsis and the copy of the order of the Tribunal on merits of addition and other miscellaneous documents. In the written synopsis which runs into 16 pages, the assessee narrated the AO's allegations and elaborated on the facts relating to the visits of his daughters during the period 1994-2003 ie MHADA project period. He also mentioned that his daughter Suhani Sandip Gandhi is a senior architect in the assessee's team. Further, referring to the order of the CIT (A), assessee mentioned that the CIT(A) accepted the fact about rendering the services by the assessee's daughters for MHADA project and his reservation is only with regard to the quantity of expenditure qua the services rendered. Further, the 4 assessee discussed the absurdities in the order of the CIT (A). Assessee commented that since his daughters are educationally qualified ones and their visits are genuine and bona fide, since the services are factually rendered by them, the expenses are also allowable. He also mentioned that this aspect of their services was part and parcel of the proceedings before the appellate proceedings in connection with the arbitration award which is the source of receipts offered in the year as income of the assessee. Dr. Suryakant N. Gandhi mentioned that he is totally upset with the order of the Tribunal on merits and however, he argued stating that the penalty proceedings are different from that of the appellate proceedings on merits. Therefore, these penalty proceedings should be decided in favour of the assessee considering the fact that assessee made a disclosure of the fact in the books of account which were revealed fully in the Income Tax returns and there is no concealment of information in any form. Further, Dr. Gandhi mentioned that the fact about the qualification of the daughters and their abilities to render services to the MHADA project are not suspected. He also mentioned that CIT (A) accepted the fact that they have rendered services and he has a reservation about the instant claim on their account. Sri Gandhi vehemently argued stating that the penalty should not survive in view of the absence of any concealment of particulars which is not possible when the disclosure of details is full and true.
7. On the other hand, Ld DR vehemently argued that assessee is under obligation to prove that the claim made by him is a genuine and the expenditure incurred wholly and exclusively for the purpose of business of the assessee. It is a settled law that the assessee is under obligation to furnish, when a claim of deduction u/s 37(1) of the Act is made.
8. We have heard both the parties, perused the orders of the Revenue Authorities and the paper book filed in the light of the written submissions made by the assessee. The undisputed facts in this case are that the expenditure on account of foreign travel and the personal expenses are reimbursed by the assessee. These expenses were undisputedly incurred and therefore, the genuineness of the same is not disputed. Further, regarding disclosure of the information, we find that the 5 assessee is not a defaulter on this account. It is also not disputed that his daughters, whose names are mentioned above, are qualified educationally and possess the ability to render services to the assessee. CIT(A) also concurred with the assessee that they have rendered the services to the assessee. Of course, it is true that CIT (A) only suspected the extent of allowable claim of expenditure. It is also a fact that the Revenue does not have any adverse information to prove that they have visited India for the purpose of personal reasons only and not for the business. Though, there is an allegation that they have come for personal visits and the same is unsubstantiated and hence, it is a case of mere surmises and doubts. Therefore, in our view, the issue is not free from debate. Can we allow the levy of penalty on such debatable issue? It is essential to mention that the details about their services to the assessee were also under the scrutiny of the arbitration award as informed by the assessee. It is also a fact that assessee was badly immobilized due to paralytic stroke and he required the assistance of his qualified daughters to execute the project of MHADA. Further, we have also perused the Hon'ble Delhi High Court judgment in the case of Zoom Communications (supra), relied upon by the CIT (A) and find that the said decision is relevant in the factual context of "obvious" error. We do not find any such 'obvious error' in this case attracting the levy of penalty u/s 271(1)(c) of the Act. It is a matter of dispute and debate whether the expenditure in question was for the purpose of the business or for personal reasons as alleged by the AO. Such issues cannot be kept under the category of 'obvious errors'. The CIT (A) although made a reference to the Hon'ble Supreme Court judgment in the case of CIT vs. Reliance Petro-products P. Ltd. [2010-TIOL-21-SC-IT], he does not distinguish how the ratio of this case does not apply to the present case. The Revenue also does not have any incriminating material to suggest that the visits undertaken by the daughters of the assessee are for personal reasons and not for business purposes of the assessee. Therefore, it may be a fit case of confirming the addition on merits for failure to furnish evidences or bills in support of the rendering the services and the claim of business visits. Under such debatable and disputed factual matrix of the case, it is not a fit case for levy of the penalty u/s 271(1)(c) of 6 the Act. Therefore, the order of CIT (A) is required to be reversed. Accordingly, grounds raised by the assessee are allowed.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 16th day of January, 2013.
Sd/- Sd/-
(DINESH KUMAR AGARWAL) (D. KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date : 16.1.2013
At :Mumbai
Okk
Copy to :
1. The Appellant.
2. The Respondent.
3. The CIT (A), Concerned.
4. The CIT concerned.
5. The DR "E", Bench, ITAT, Mumbai.
6. Guard File.
// True Copy//
By Order
Assistant Registrar
ITAT, Mumbai Benches, Mumbai